The Company:

Smith Company (SC) produces special electronic micro-switch devices for smartphone manufactures, with the company located in the Rocky Mountain region of Colorado. SC has been in business for the last 10 years and continues to do well.

Production Information:

SC produced 5,221,782 microdevices in 2011, as a subcontractor to larger smartphone retail companies. There were a total of 330-working days in 2011 for SC.

SC main facility was designed to achieve a capacity level of between 17000-18000 micro-device units a day (from 7:00 a.m. to 12:00 midnight). However, company analysis has shown that the best operation level (BOL) for SC is 17,600 calls a day. At this BOL level, SC is able to achieve its lowest unit cost per device.

SC has a company policy, which states, Any one-month period where total unit production that exceeds 500,000 is considered production cushion or capacity cushion and place in inventory to be sold later. SC is compensated for any cushion periods at a rate of $10 per device placed in inventory by one special customer who often calls for inventoried units on short notice and therefore, pays to makes sure SC maintains some level of inventory.

The following is a monthly breakdown of SCs production rates for all of 2011. This information was obtained in its raw form and some normalizing of the data is required. Normalization means completing the Production Numbers column making the information provided in unit/month for each month rather than in units/day.

Table Information:

Youll need to normalize Table 1 below before completing the fourteen (14) questions that follow.

Table 1 SCs 2011 Monthly/Daily Production Data (Requiring Normalization)

Month	Production Numbers In Days and Months	Number of Working Days During Month
January	15,000 Units/Day	27
February	15,900 Units /Day	26
March	419,720 Units/Month	28
April	16,790 Units/Day	27
May	504,900 Units/Month	27
June	17,600 Units/Day	28
July	391,972 Units/Month	28
August	12,897 Units/Day	29
September	11,569 Units/Day	27
October	463,681 Units/Month	29
November	17,689 Units/Day	27
December	19,000 Units/Day	27
Total		330

Answer the Following Questions Based on the Information Provided in the Smith Company Case

Possible Points There is a total of 100 points possible. The bracket [] next to each question indicates what that question is worth in points.

1. Based on 2011 information what is SCs annual design capacity production range (quantity)?

2. What was its annual capacity utilization rate for 2011 as compared to the companys BOL?

3. What would the companys annual production output be if it produced at its BOL for all of 2011 year?

4. Which are the second, third and fifth most underutilized months with regard to capacity utilization in 2011?

5. What is the capacity underutilization percentage for each of these three months (reference: Question 4)?

6. What three months did SC complete production at the lowest per unit cost?

7. What three months did SC complete production at the highest per-unit cost?

8. a) Was/were there any month/s were capacity cushion would come into affect?

b) If so, what was/were the month/s?

c) What was the cushion in units (quantity) and capacity cushion percentage for the month or months in question?

9. Based on the completion of Question 8 and other information provided what was SCs total inventory compensation for 2011 (please show in total dollars)?

10. What month/s fall under the definition of economies of scale, excluding the

BOL month/s.

11. a) Were there any months where the company achieved a BOL?

b) What month/s?

c) Respond to this statement The BOL is not sustainable because

12. What was the cost of Januarys underutilization performance (think along the lines of the BOL) if each unit not produced cost the company $15? (Think along the lines of what was produced and what could have been produced to arrive at this calculation